Naturally, an opposition exists between traditional money and Bitcoin, as the whole idea of cryptocurrency is based around undermining the traditional way of dealing with money. This article intends to outline the difference between traditional currencies and Bitcoin, and the part they play in a digital future.
Money Traits
Over the course of history, money took many forms, from physical objects to precious metals, notes, digital money, and now currently include cryptocurrencies such as Bitcoin.
As time passed, it was decided that certain traits made a currency more suitable and convenient. These traits are namely:
- Divisible
Meaning it can be broken up into pieces so one can make a payment of a specified amount.
- Non-consumable
Currencies should only be used as an exchange of value; they should not be consumed for other purposes.
- Portable
Currency should have the characteristic of being transportable, meaning one should be able to carry it around without hassle.
- Durable
By being durable, a currency should not depreciate, nor should it wear away over time.
- Secure
If a currency is secure, it cannot be forged.
- Transferable
Currency should be able to be transferred from person to person, person to a thing, and even thing to thing.
- Scarce
There should only be a limited amount of currency at all times, and replication should have a cut-off point.
- Fungible
By having the trait of being fungible, all pieces of the same value should be equivalent.
- Recognizable
As a last trait of currency, it should be acknowledged and accepted as a means of payment.
From the above information, it can easily be observed that Bitcoin possesses all the traits that a currency should have. Needless to say, the US Dollar does as well.
What’s the Difference?
If both Bitcoin and traditional currencies arguably have the same traits to make them a currency that is useful and convenient, what sets them apart? The main difference exists in the sovereign trait.
At a closer look, this means who possesses the most supreme and absolute power over the two currencies. Governments have authority over traditional currencies, whereas Bitcoin is completely independent. Thus, no one other than you has influence over your money and financial doings.
Bitcoin relies on the joint power of computing network users, where nobody is considered more or less powerful. This single difference in the currencies alone is what allows Bitcoin to ultimately minimize the cost of using the system, which is not the case in a banking environment.
On the contrary, fiat currencies rely heavily on financial intermediaries. If you don’t know what fiat currencies are, it is a government-issued currency such as the US Dollar. These organizations are commercial banks, central banks, payment processors, and governments, and they have a say on everything you do with your money. These centralized entities execute authority in transaction approval and even in the legality of your money.
Another noteworthy difference is in the programmability between the currencies. Bitcoin is a means for the future and has introduced a completely new element of programmability. It is an upgrade to the concept of traditional cash, where a transaction can be attached to programs and smart contracts that can only be executed after specific conditions are met.
Since Bitcoin is relatively new to the scene, it is natural to want to question it. Money is central to most relationships. To hear that Bitcoin is a revolutionary underlying technology that will redefine money, it is no surprise that a comparison to traditional forms of currency already exists for one to investigate. One day this virtual currency may completely replace cash or paper money, and some will still wonder why; you won’t though if you invest today. Using an app like the crypto trader system can make things extremely easy for you.
